Open the Books on Bankruptcy
This could be the year that Orange County’s lawsuit against Merrill Lynch over the county’s bankruptcy finally goes to trial. Speed would be beneficial, because the legal bills keep mounting.
Last month, an audit required by the state Legislature showed that in the year ending last June, nearly $10 million was paid to lawyers handling the county’s civil lawsuits against the brokerage and other companies it accuses of helping pave the way to fiscal disaster. Hundreds of thousands of additional dollars were paid to an accounting firm doing financial consulting work.
Those outlays are in addition to the more than $40 million the county paid just to help navigate its way out of the bankruptcy, with most of the money going to lawyers.
The audit was welcome, but more detail would have been an asset. The county’s lawyers have argued that they will not divulge how much individual lawyers or consultants are paid, or what specific services are provided, lest the legal strategy be disclosed.
Former state Treasurer Thomas W. Hayes is overseeing the county’s lawsuits, which are financed by a $50-million fund established by the county and which have Merrill Lynch as the primary target. Hayes has said he reviews all bills, together with an assistant and a representative from the more than 200 agencies that lost $1.64 billion when the county’s investment pool collapsed in December 1994. While no one is asking the county to give away secrets, more information should be provided on how the public’s money is being spent.
Last year, the county district attorney’s office agreed not to seek criminal charges against Merrill Lynch for its role in the bankruptcy. In return, the company agreed to pay the county $30 million. But the public has been deprived of greater insight into the origins of the bankruptcy by the refusal of the district attorney to disclose the fruits of more than two years of grand jury investigations. Lower courts agreed with news organizations that the testimony should be made public, but a state Supreme Court justice has blocked release at least temporarily. The bankruptcy was the biggest fiscal disaster in county history. There is a need to learn as much as possible about how and why it happened.
